A challenge to traditional management theory
Modern management theories are focussed on how individuals contribute to organisation and corporate performance while the performance of the chief executive is dictated by the organisation’s ﬁnancial returns and share price. While organisations espouse the principles associated with total quality management, learning organisations, high performance organisations and implement balanced score cards, the chief executive’s primary focus is ﬁxated on retaining control of the organisation to meet shareholder expectations. As we enter the new millennium the corporate world has been rocked by the scandals involving Enron, Worldcom and Adelphia in the USA and in Europe by Parmalat and Mannesmann. These, and a host of other organisations, have been publicly criticised for fraudulent accounting practises or excessive personal gain for the chief executive and senior members of the administration while creating a ﬁnancial catastrophe for employees and shareholders. The public no longer trusts the corporate world. The World Economic Forum’s (2004) global surveys on trust in 2004 and 2002 indicate that people’s trust levels in global and large domestic companies remain very low with less than 10 per cent of respondents reporting “a lot of trust” in these institutions operating in the best interests of society. (The results for 2004 show some improvement over 2002.) In Europe, the concept of corporate social responsibility (CSR) is the subject of many boardroom discussions and in the USA the Dow Jones publishes a CSR index on the premise that many investors believe ﬁrms who practice social responsibility provide better long term ﬁnancial returns. The intent of CSR is to add value to society, to leave the world in a better position for our grandchildren by building environmental and social responsibilities into the traditional economic equation. Proponents of CSR claim that this approach will restore public trust and respectability in the corporation, while the “non-believers” state that the concepts of CSR only reﬂect appropriate standards of corporate governance and there is no need for CSR as a separate movement. Twenty years ago similar sentiments were expressed about “quality” but the quality movement ensured that the concept is now a necessary but not sufﬁcient condition for effective competition. As we enter the twenty-ﬁrst century the concept of corporate citizenship has captured the attention not only of corporate leaders but also society. The corporate scandals associated with Enron in the USA and Parmalat in Europe together with the collapse of Arthur Anderson, the respecting accounting, auditing and consulting global giant,
Ed Weymes is Associate Professor at the University of Waikato Management School, Hamilton, New Zealand.
Management theory, Philosophy, Social responsibility
This paper challenges the philosophy underlying traditional management thinking. The historic and possibly arcane purpose of business, to maximise shareholder wealth, is no longer a relevant proposition. Academics and managers need to rethink the philosophical framework of management theory. For the past 50 years the management literature has adopted a more “human” approach to the management of organisations yet the importance of systems and process and performance measurers associated with the scientiﬁc theory of management prevails. With the growing importance of knowledge creation and the corporate social responsibility movement it is timely to reﬂect on the purpose of business as adding value to society and rejecting the focus on accumulation of personal wealth. Knowledgecreating enterprises are founded on the development of sustainable relationships within the organisation and with stakeholders and thus require a different philosophical perspective.
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